For years now, mining companies have gotten rich supplying the raw materials that have fueled consumer booms from China and India to Brazil. As commodities prices soared, these companies socked away cash and snapped up rivals. Now they are embarking on another round of deals that promises a new class of juggernauts. The resulting megaminers would have great influence over the cost of raw materials like iron ore, copper and uranium -- and, by extension, the price of consumer electronics, cars and new apartment blocks.

Last month, Anglo-Australian miner BHP Billiton announced a $125 billion proposal to merge with Anglo-Australian rival Rio Tinto. The deal would combine the world's No. 1 and No. 3 miners into a company worth as much as $320 billion at current market values -- bigger than every global oil company except Exxon Mobil Corp. and Russia's OAO Gazprom. It would be the world's largest producer of copper and aluminum, its No. 2 iron-ore provider and potentially the largest source of uranium.

BHP's proposal set off talk of more deals. Last week, the world's No. 5 mining company, Switzerland-based Xstrata PLC, suggested it was open to being taken over -- with likely suitors including the two other top five names, London-based Anglo American PLC and Brazil's Companhia Vale do Rio Doce, or Vale. This comes on top of more than $100 billion worth of mining deals in the past two years: Freeport-McMoRan Copper & Gold Inc. of New Orleans acquired Phelps Dodge Corp. of Phoenix; Vale bought Canada's Inco Ltd.; Xstrata took over Canadian nickel giant Falconbridge Ltd.; and Rio Tinto snatched up aluminum powerhouse Alcan Inc.

As recently as early this decade, the mining sector was filled with relatively small companies with minimal pull on the world economy. But the acquisitions of recent years echo the oil-industry consolidation that began in the late 1990s and produced today's "super majors" -- Exxon joining with Mobil, Chevron with Texaco, and British Petroleum with both Amoco and Atlantic Richfield.

"If you look at the industry and the history of oil, really the same game is playing out," says Alex Gorbansky, a managing director at Frontier Strategy Group, a Washington, D.C.-based emerging-markets advisory firm.

Not all of the forces that united oil companies were like those driving Big Mining today. Commodity prices were depressed in the late 1990s, and oil companies thought merging would help them cut costs to survive hard times. Today's miners face the opposite challenge: Prices are so high that natural-resources companies have more cash than they know what to do with.

But the similarities are striking, say investors, bankers and analysts who study the sector. On the back of explosive growth in China and other developing countries, some mined commodities are taking on a strategic importance that's starting to rival that of crude. As with oil, most of the world's easy, high-grade mineral deposits have been tapped, leaving resources that are lower-grade, harder to reach or in politically challenging locations. By merging, miners hope to tackle the complex projects that remain.

Many Western miners hope their size and technical prowess will make them choice partners in countries such as Mongolia that need foreign expertise to develop their assets. Big Western miners are also bulking up to compete with new miners in countries including Russia and China.

Size will also matter in an era of increasing resource nationalism. Much as Russia and Venezuela cracked down on oil companies' access to local reserves, the likes of India, Indonesia and Bolivia are increasingly protective of their mineral resources. Megaminers with broad experience and well-known names could have more leverage to persuade such countries to open for development. On the flip side, should host governments decline to cooperate, big miners would have a portfolio of reserves to fall back on.

The Big Mining era could result in higher profits for leading companies, much as consolidation boosted earnings for Big Oil. But the trend could make life more difficult for consumers. A few big companies could have the power to wait out market weaknesses and keep prices high, by putting projects on hold or moving slowly to start new ones.

"The more concentration you get, the more monopoly power you get," says Amy Jaffe, an energy-studies fellow at Rice University's Baker Institute for Public Policy. In a November study, Ms. Jaffe found that oil-sector consolidation resulted in less oil, not more, from big companies. She suggests that's because big oil companies have spent money on dividends and share buybacks at the expense of new exploration. "People with monopoly power don't use it to decrease prices and develop more supply," she says.

Though a BHP-Rio deal is far from certain, the overture is the product of broad forces that analysts say are driving consolidation across the industry. A look at the proposed tie-up provides one scenario of how the world of Big Mining would look.

BHP Billiton and Rio Tinto both date to the 1800s, when their predecessors developed mines in Australia and Spain. Over the years, the companies grew through mergers and new mines to become two of the business's largest players. In the industry, BHP was known as the more aggressive, with risk-taking geologists who favored large, complex projects. Rio was seen as stuffy but financially savvy, with a tendency to talk down the value of its assets to manage investor expectations.

As recently as 2001, there were a dozen or more midsize players with market capitalizations of around $3 billion to $5 billion, and many smaller players. No single company achieved a dominant role.

Melbourne was an industry center. Two decades ago, the city of trams and Victorian-era buildings had scores of midsize mining houses, including several that became known collectively as the Collins House Group because they were located on a stretch of Collins Street downtown. Rival executives sometimes drank together at the posh Melbourne Club, housed in a 19th-century landmark building.

Business changed as the recent commodities boom gathered momentum starting in 2002. New mines were in great demand, but they were few and far between. In presentations to investors last year, former BHP Chief Executive Charles "Chip" Goodyear noted that mining companies were finding only a handful of major new deposits in the Western world each year, compared with 30 or more in the late 1960s and early 1970s. Most newer mines were based on deposits discovered years or decades before. Many had never been developed because they were in places that posed significant risk, like the Congo, or held relatively low-grade minerals.

Meanwhile, resource-rich countries have been tightening the screws on foreign investors. Earlier this year in Bolivia, authorities seized a tin smelter owned by Glencore International AG of Switzerland. Glencore protested but hasn't been compensated. Similarly, officials in mineral-rich Indonesia have stalled legislation that would clear the way for new foreign mining investments. Rio has been in talks with the Indonesian government since 2005 to develop a large nickel mine there but hasn't sealed a deal.

On another front, new competitors from developing countries were taking form. Russia's United Co. Rusal, the product of a three-way merger, elbowed Alcoa aside recently to become the world's biggest aluminum company. China Shenhua Energy Co., a coal producer, raised nearly $9 billion in the year's second-largest public stock offering. It aims to grow by acquiring assets overseas, it has said.

As BHP and Rio grappled with this new reality, cash from sales in emerging markets were piling up. Both companies' operations in iron ore -- a key component in steel -- were booming as highways, factories and apartment towers sprouted up across China. Chinese iron-ore demand has more than doubled since 2003, and the country now accounts for roughly half of the world's iron-ore imports, compared with 29% in 2003. Iron-ore prices have more than doubled in the past three years.

Mining companies boosted dividends and repurchased shares to appease investors, much as oil companies have done. But that didn't boost future growth prospects. So as Big Oil did in the 1990s, BHP and its cohorts began buying each other.

In 2005, BHP launched a $7 billion takeover of WMC Resources, an Australian copper, nickel and uranium miner and a mainstay of the Melbourne mining scene. Rio bought big stakes in other companies' undeveloped mines.

By 2007, the old midsize miners had practically disappeared from Melbourne. BHP and Rio, with high-rise offices downtown, were the undisputed heavyweights. Globally, the mining landscape was dominated by a handful of giant players, including BHP, Rio, Vale, Xstrata and Anglo American. BHP's market value is now on par with Chevron Corp. Brazil's Vale has a market capitalization bigger than ConocoPhillips.

BHP and Rio both positioned themselves for bigger deals. When Mr. Goodyear retired from BHP's top job earlier this year, the company chose South Africa-born Marius Kloppers, who held an M.B.A. and a Ph.D. in materials science. Mr. Kloppers had led the internal team that executed BHP's acquisition of WMC Resources.

Facing its own CEO vacancy, Rio tapped American Tom Albanese. At age 17, Mr. Albanese had set out from New Jersey to Alaska, persuading the University of Alaska to create a major for him called "mineral economics." He got a job staking claims in remote parts of the state, living out of a tent. Mr. Albanese joined Rio Tinto in 1993 and helped lead the company's effort to invest in a $3 billion project in Mongolia, Oyu Tolgoi, that analysts believe is one of the world's largest undeveloped copper and gold deposits.

As Rio's CEO, Mr. Albanese bought Alcan out from under rival Alcoa. When it was announced, the $40 billion deal was the mining sector's largest. Many analysts assumed it was driven in part by a desire to prevent other suitors -- including BHP -- from launching an attack on Rio.

In November, BHP said it was going after Rio anyway.

In a presentation laying out the proposal, BHP's Mr. Kloppers said he wanted to create a "super major" of mining. The company would focus on high-reward projects, including capital-intensive jobs smaller companies can't handle. "I would take my cue from some of the very effective work in the oil and gas sector when some of the super majors were put together," Mr. Kloppers said.

After a BHP-Rio merger, just two companies -- BHP-Rio and Brazil's Vale -- would control more than 70% of the world's iron-ore trade. (By contrast, the Organization of Petroleum Exporting Countries controls only about 40% of global oil.) Likewise with uranium: About 70% of the world's supply now comes from 12 mines, including three controlled by BHP and Rio. One of BHP's Australian mines, Olympic Dam, has the largest known uranium reserves in the world. The speed with which megamining companies choose to develop such assets would have a large impact on world prices.

BHP and other large miners say they have no intention of slowing new developments to squeeze customers. BHP argues that a merger with Rio would help boost near-term supply because of the combined company's new efficiencies. (Please see related story2.)

Rio's Mr. Albanese has downplayed the similarities with Big Oil, though he concurs it is getting harder to find good new projects. Rio officials have also argued that BHP's offer significantly undervalues its assets, and investors are waiting to see whether BHP comes back with a bigger one. But some kind of combination is likely, many analysts say. Many shareholders they've talked to approve of a merger in concept, they say.

The proposal has set other talks in motion. A few days after BHP's proposal was announced, Russia's Rusal said it was trying to acquire roughly 25% of OAO Norilsk Nickel, a major Russian nickel producer. People familiar with the situation say the Russian aluminum producer hopes a Norilsk stake would provide additional diversity to compete with a bulked-up BHP.

Rumors have also been swirling that Chinese steelmakers could launch a competing bid for Rio Tinto priced at about $200 billion. Most analysts believe such a deal would be hard to pull off, in part because of likely opposition from foreign governments.

"We're only talking about a couple of years before [China-based companies] are ready" for a deal the size of BHP-Rio, says Mark Pervan, an analyst at ANZ Bank in Melbourne.

"We're in a game of musical chairs," adds Wayne Atwell, a former Morgan Stanley mining analyst who's starting a resources fund, Pontis Global, in Stamford, Conn. "There are fewer and fewer chairs, and if you want to make another acquisition, you'd better make it now or it will be gone."

The outlook for mining could change dramatically in the event that China suffers a severe economic slowdown. In that case, commodity prices could fall significantly, leaving big miners with assets purchased at the top of the market.

But most industry observers expect Chinese demand to remain strong, and say the currents of consolidation are moving too quickly to keep the sector's remaining companies from joining in. When they do, they'll have to invent new ways to grow. One new idea now circulating in the industry: the possibility that Big Mining will start buying Big Oil companies.

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